Reports dispute impact of Dutch disease on Canadian manufacturing

CALGARY – A belief that a commodities boom has caused a decline in Canada’s manufacturing sector is being challenged by two reports from the University of Calgary’s School of Public Policy.

The first argues that manufacturing has been in decline for the last 50 years and cannot be blamed for the recent runup in the value of the Canadian dollar.

It also says data indicates that employment in manufacturing has been falling over the last 35 years for most members of the Organization for Economic Co-operation and Development — including countries that don’t have substantial natural resources.

The second report says a higher Canadian dollar may be helping manufacturing because of increased purchasing power, which lowers the cost of goods and the cost of production.

The theory behind Dutch disease suggests that a boom in the resource sector causes the currency to appreciate, undercutting exports of manufactured goods.

It became a political football in Canada last winter when NDP leader Thomas Mulcair blamed Alberta’s oil riches for the some of the economic problems facing Ontario and Quebec.